Eight state attorneys general today filed a lawsuit challenging a new Federal Deposit Insurance Corporation rule that creates a loophole allowing predatory lenders to evade state laws that forbid excessive interest-rate charges.
From the California attorney general's press release: "These caps on interest rates play a critical role in regulating payday loans and other high-cost lending throughout the state. Under existing federal law, federally insured state-chartered banks are exempt from state interest-rate caps. The FDIC’s final rule extends these exemptions to any non-bank lender that buys loans originated by an exempt bank. The final rule virtually invites predatory lenders to 'rent a bank' — use a federally insured bank — to do its dirty work of issuing loans with interest rates that exceed state law which the bank then transfers to the predatory lender. The complicit bank washes its hands of the usurious loan, the predatory lender escapes the reach of state laws prohibiting such loans, and consumers pay the price."
The complaint is here.